Understand - Personal Finance



MBA620/Fin 418 Day 11 Summary2019 AUTONUMOUT Understand your housing options in home ownership AUTONUMOUT Know how to compare different types of loans with different fees AUTONUMOUT This is critical so you can compare among the many alternatives you will be given. We talked about the factors go into picking a loan AUTONUMOUT They included Time Horizon, Risk Tolerance, Preferred Payments, and Goals (big house, investment, Pay off other debt) AUTONUMOUT We used our Excel Loan Type Spreadsheet to pick the right loan AUTONUMOUT We talked about Points and how to comparing Loans AUTONUMOUT We talked through Points and Prepayment AUTONUMOUT We discussed Loan Estimates AUTONUMOUT We showed how to calculate the Effective Interest Rate AUTONUMOUT We discussed Home Loan Calculations and TT19 AUTONUMOUT We shared “How do you compare different loans with different interest rates and fees?” AUTONUMOUT You will have lots of options. We gave you a framework for comparing different loans with different points and fees AUTONUMOUT We also added what happens when you prepay a loan AUTONUMOUT Understand how to develop your Housing Plan AUTONUMOUT We finished with my ideas for vision, goals and plans and strategies AUTONUMOUT We did Case Studies on effective interest rates AUTONUMOUT Case Study #1 – EIR AUTONUMOUT Case Study #2 – EIR with prepayment AUTONUMOUT Case Study #3 – EIR with buy-down points AUTONUMOUT We did Case Studies and answered Questions AUTONUMOUT Questions on Financing/Refinancing and working with Brokers AUTONUMOUT How are mortgage brokers paid? (slides 7-8)Mortgage brokers make money two ways: Origination fees: These are the costs and profits on making the loan, Discount Points: These are payments to lower the Loan interest rate AUTONUMOUT How do I estimate the lender’s required rate of return? (slides 9) AUTONUMOUT Find the lowest rate you can buy down to. This may be a good approximation AUTONUMOUT How do I get the best deal with mortgage brokers, i.e., no bait and switch? AUTONUMOUT Hold them accountable. See slides AUTONUMOUT How do I know when to refinance my home? (slides 14-23 includes case) AUTONUMOUT What’s the lowdown on buying down or paying discount points? (slides 24-31 includes case) AUTONUMOUT How easy is it to refinance a home with an interest only mortgage? (slides 32) AUTONUMOUT Yes, but only assuming your equity is greater than the value of the loan AUTONUMOUT If a person is upside down in their mortgage, can they still refinance? (slides 33) AUTONUMOUT If the entire mortgage is the first, then likely no. If there is a first and a second mortgage, and the value of the home is significantly greater than the first mortgage, you may be able to refinance because the first has the claim on the home AUTONUMOUT Questions for Before you Apply for the Mortgage AUTONUMOUT What happens when good credit marries bad credit? (slides 34-37) AUTONUMOUT What about prepayment penalties? What should I know? (slides 38-41) AUTONUMOUT How much of a percentage should I pay for a down payment? (slides 42) AUTONUMOUT Is a 15 or 30 year loan better? (slides 43) AUTONUMOUT Do I have to pay Private Mortgage Insurance (PMI)? (slides 44-45) AUTONUMOUT If the offer is not accepted, is the earnest money returned? Yes (slides 46) AUTONUMOUT What type of account should you use to save for your down payment? (47-48) AUTONUMOUT Questions on housing choice and timing AUTONUMOUT How do I know whether to rent versus buy? (slides 49) AUTONUMOUT What is your recommendation on your first house? (slides 50-54) AUTONUMOUT Should we buy now when the market is low? (slides 53-54) AUTONUMOUT How do you balance current home size and family need? (slides 55-58) AUTONUMOUT With a tax shield on mortgage interest and low rates on student loans, doesn’t it make sense to invest for retirement instead of immediately paying off these loans? AUTONUMOUT Other Real Estate questions AUTONUMOUT What is a short-sell? (slides 61-62) AUTONUMOUT What do you think about purchasing distressed properties out of state? (63-64) AUTONUMOUT If you move from your first house, do you recommend keeping it as a rental? AUTONUMOUT Review the home buying process (slides 66-71) AUTONUMOUT Possible Home strategies (slides 72-76) AUTONUMOUT Key Take Aways AUTONUMOUT _________________________________________________________________________ AUTONUMOUT _________________________________________________________________________ AUTONUMOUT Spiritual ThoughtI got the idea to run the marathon from my home teacher, who, with his wife, ran their first marathon at age 55. My wife and I sat by this couple just three weeks before the race at stake conference, and the wife shared with us their experiences and suggestions for our race. It was a wonderful time to get together with this wonderful couple who meant a lot to us and who inspired us to better things.Before we left, I heard that she was diagnosed with blood cancer. We remembered her in our prayers over the weekend. On Monday when I returned to the office, I learned that she passed away. On my way home I was listening to Conference Talks when Elder Uchtdorf said:If we devote ourselves to the pursuit of worldly wealth and the glitter of public recognition at the expense of our families and our spiritual growth, we will discover soon enough that we have made a fool’s bargain. The righteous work we do within the walls of our homes is most sacred; its benefits are eternal in nature. It cannot be delegated. (“Two Principles for Any Economy,” Ensign, October 2009.May we always keep our priorities in order and do the important things, and as they said at the forum today to “live the best we can because we do not know how long that will be.” ................
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